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Tech Faithful Follow Rally into Options Plays

After the overall market had barely slogged its way through the past two sessions, Tuesday's early options action was showing renewed enthusiasm for some tortured tech stocks, primarily

Qualcomm

(QCOM) - Get Report

.

While there was still enough

put option volume -- 6 1/2 puts for every 10

call options -- to show traders and professional investors tilting toward caution, the pockets of bullishness in some tech names came as a refreshing surprise.

Qualcomm, which had been battered for most of the summer before beginning to recover some ground last week, was up $3.81 to $73.63 in early trading. That rally was gratifying to call option buyers who had been staking out positions in the company for the past three weeks.

Tuesday, the action picked up as traders bought Qualcomm's October 70 call options early and often. Volume on the calls, which are bought to express bullish sentiment in a stock, reached 6600 as the price jumped 2 1/4 ($225) to 7 7/8 ($787.50).

More than 1100 of the more speculative October 80 call options changed hands, showing some investors think Qualcomm shares will rediscover the vigor that made them the star of 1999. Demand for the October 80 calls, which will be worthwhile at expiration only if Qualcomm shares are at or above $80, drove the price up 1 1/8 ($112.50) to 3 3/8 ($337.50).

Another tech stock star of the day was

DRAM chip giant

TST Recommends

Micron Technology

(MU) - Get Report

, which was rated a strong buy by

Chase Hambrecht & Quist

analyst Sudeep Balain.

The juicy target price of $120 a share also attracted call option buyers, who sent volume on the October 80 calls to more than 9400 this morning as the stock popped $4 to $62.50.

The calls rose in price 1/2 ($50) to 1 1/4 ($125), but call option sellers wagering against such a drastic run-up could have driven some of that action.

U.S. Bancorp

(USB) - Get Report

options were popular for the second straight session as call buyers may be looking for a play on the rampant consolidation in U.S. banking.

U.S. Bancorp, trading up 94 cents to $21.88, saw volume of more than 1000 contracts in its October 20 call options. Typically such action would be indicative of little, but because only 247 of those contracts have been opened up until today, traders took note.

Call options are frequently the chosen weapon of investors trying to beat some gains from a stock they expect to move dramatically because of takeover speculation. U.S. Bancorp shares are well off their 52-week high of $38.06, and traders could be trying to guess which U.S. bank will be the next hot takeover target.

On Monday, more than 2300 of the November 22 1/2 calls traded, giving the first indication that some traders were playing for a dramatic move in the stock over the next few months.